Aon Corporation (NYSE: AON) is a provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. It is based in the Aon Center in Chicago Loop Illinois, United States.[3] In July 2007, Aon Corp. was ranked as the world's second largest insurance broker.[4]
Aon was created in 1982, when the Ryan Insurance Group (founded by Pat Ryan in the 1960s) merged with the Combined Insurance Company of America (founded by W. Clement Stone in 1919). In 1987, that company was introduced to Wall Street as Aon, a Gaelic word meaning “oneness”. Combined Insurance was sold to ACE Limited in April 2008.
On August 22, 2008, Aon announced that it had acquired London-based Benfield Group. The acquiring price was US$1.75 billion or £935 million, with US$170 million of debt.[5] Today, the company is best known internationally as the principal sponsor of English football giant, Manchester United.[6][7]
On July 12, 2010, Aon announced that it has agreed to buy Lincolnshire, IL based Hewitt Associates for $4.9 billion in cash and stock.
Aon Corporation (Aon), incorporated in 1979, provides risk management services, insurance and reinsurance brokerage, and human resource consulting and outsourcing services. Aon delivers its technical expertise locally through colleagues. The Company serves clients through the businesses, which include risk solutions and human resource (HR) Solutions. The Company’s clients include corporations and businesses, insurance companies, professional organizations, independent agents and brokers, Governments, and other entities. Aon also serves individuals through personal lines, affinity groups, and certain specialty operations. In October 2010, Aon completed the acquisition of Hewitt Associates, Inc. (Hewitt), a human resource consulting and outsourcing company. Hewitt operates together with Aon's existing consulting and outsourcing operations under the Aon Hewitt brand in its HR Solutions segment.
Risk Solutions
Risk Solutions (formerly Risk and Insurance Brokerage Services) acts as an advisor and insurance and reinsurance broker, helping clients manages their risks via consultation, as well as negotiation and placement of insurance risk with insurance carriers through its distribution network. During the year ended December 31, 2010, the Risk Solutions segment generated approximately 75% of the Company’s consolidated total revenues. Aon provides risk and insurance brokerage and related services in this segment primarily through its Aon Risk Solutions and Aon Benfield companies.
The Company operates in Risk Solutions segment through two transactional product lines: retail brokerage and reinsurance brokerage. In addition, a key component of this business is its risk consulting service offering. Retail brokerage encompasses Aon’s retail brokerage services, affinity products, managing general underwriting, placement and captive management services. The United States operations provide products and services to clients in North, Central and South America, the Caribbean, and Bermuda. It’s United Kingdom; Europe, Middle East & Africa, and Asia Pacific operations offer similar products and services to clients throughout the rest of the world. The Aon Client Promise enables its colleagues to describe benchmark and price the value it delivers to clients.
During 2010, the Company developed the Global Risk Insight Platform (GRIP), which provided its clients and insurers with additional market insight, as well as product offerings and facilities. As a retail broker, Aon serves as an advisor to clients and facilitate a spectrum of risk management solutions for property liability, general liability, professional and directors' and officers' liability, workers' compensation, and additional exposures. The Company delivers specialized advice and services, in such industries as technology, financial services, agribusiness, aviation, construction, health care and energy, among others. Through its global affinity business, Aon provides products for professional liability, life, disability income and personal lines for individuals, associations and businesses. In addition, it is a provider of risk consulting services, including captive management that provide its clients with alternative vehicles for managing risks. The Company’s eSolutions products enable clients to manage risks, policies, claims and safety concerns through an integrated technology platform.
The Company’s reinsurance brokerage offers advisory services in program design and claim recoveries. An insurance or reinsurance company may seek reinsurance or other risk-transfer solutions on all or a portion of the risks it insures. To accomplish this, its reinsurance brokerage services use dynamic financial analysis and capital market alternatives, such as transferring catastrophe risk through securitization. Reinsurance brokerage also offers capital management transaction and advisory services. Aon acts as a broker or intermediary for all classes of reinsurance. It places two main types of property and casualty reinsurance: treaty reinsurance, which involves the transfer of a portfolio of risks, and facultative reinsurance, which entails the transfer of part or all of the coverage provided by a single insurance policy. The Company also places specialty lines, such as professional liability, medical malpractice, accident, life and health.
Aon also provides actuarial, enterprise risk management, catastrophe management and rating agency advisory services. It has developed tools and models that help its clients understand the financial implications of natural and man-made catastrophes. Aon Benfield Securities provides global capital management transaction and advisory services for insurance and reinsurance clients. In this capacity, Aon Benfield Securities is engaged in the structuring, underwriting and trading of insurance-linked securities; the arrangement of financing for insurance and reinsurance companies, including Lloyd's syndicates, and providing advice on strategic and capital alternatives, including mergers and acquisitions. Aon generates revenues through commissions, fees from clients, and compensation from insurance and reinsurance companies, for services it provides to them.
HR Solutions
HR Solutions (formerly Consulting) partners with organizations, and designs, implements, communicates and administers a range of human capital, retirement, investment management, health care, compensation and talent management strategies. During 2010, the HR Solutions segment generated approximately 25% of its consolidated total revenues. During 2010, the HR Solutions segment had operations in the United States, Canada, the United Kingdom, Europe, South Africa, Latin America and the Asia Pacific region. The Company provides products and services in this segment primarily under the Aon Hewitt brand. The Company's HR Solutions professionals work with their clients to identify options in human resource outsourcing and process improvements. Prime areas where companies choose to use outsourcing services include benefits administration, core human resource processes, workforce and talent management. Aon Hewitt offers a range of human capital services, including consulting services and outsourcing services.
The Company’s consulting services includes health and benefits, retirement, compensation and strategic human capital. Health and Benefits advises clients about structuring, funding, and administering employee benefit programs, which attract, retain, and motivate employees. Benefits consulting include health and welfare, executive benefits, workforce strategies and productivity, absence management, benefits administration, data-driven health, compliance, employee commitment, investment advisory, and elective benefits services. Retirement specializes in providing global actuarial services, defined contribution consulting, investment consulting, tax and ERISA consulting, and pension administration. Compensation focuses on compensation advisory/counsel, including compensation planning design, executive reward strategies, salary survey and benchmarking, market share studies and sales force effectiveness assessments, with special expertise in the financial services and technology industries. Strategic human capital delivers advice to complex global organizations on talent, change and organizational effectiveness issues, including talent strategy and acquisition, executive on-boarding, performance management, leadership assessment and development, communication strategy, workforce training and change management.
Aon’s outsourcing services include benefits outsourcing and human resource business process outsourcing (HR BPO). Benefits Outsourcing applies its HR expertise primarily through defined benefit (pension), defined contribution (401(k)), and health and welfare administrative services. The Company’s model replaces the resource-intensive processes once required to administer benefit plans with solutions. HR BPO provides solutions to manage employee data; administer benefits, payroll and other human resources processes, and record and manage talent, workforce and other core HR process transactions, as well as other complementary services, such as absence management, flexible spending, dependent audit and participant advocacy. The Company’s revenues are principally derived from fees paid by clients for advice and services. In addition, insurance companies pay Aon commissions for placing individual and group insurance contracts, primarily life, health and accident coverages, and pay fees for consulting and other services that it provides to them.
The Company competes with Marsh & McLennan Companies, Inc. and Willis Group Holdings Ltd.
In 1981 the new Combined International Corporation made its first acquisition when it bought the Union Fidelity Corporation along with its Nashaming Valley Information Processing unit, for $105.5 million. Union Fidelity was an accident and health insurer, which excelled at direct-response marketing and sold 75 percent of its policies through direct-mail and newspaper campaigns. The unit was expected to give Combined's door-to-door marketers a needed boost. Combined suffered from the rising costs of recruiting and maintaining a large battalion of field representatives, and the company's domestic sales had been flat for the two years prior to the acquisition.
In March 1982 Clement Stone abruptly resigned as president and CEO of Combined, citing personal reasons. His father once again resumed control of the company. After his resignation, Clement Stone received a $3.4 million consulting contract.
At age 79, W. Clement Stone was once again caretaker of the company he had founded. At the same time, the company was troubled by stagnation in domestic premiums. Although the slump in growth was offset in the short term by excellent investment results, a plan to deal with rapidly changing markets was needed.
Combined solved its leadership problems with the acquisition of the Ryan Insurance Company in August 1982. Combined spent $133 million for the 18-year-old specialty insurer and brokerage, which had been a pioneer in credit life insurance for auto dealerships and extended mechanical warranty insurance agreements. Founder Patrick G. Ryan then became president and CEO of Combined. Stone remained chairman. Although W. Clement Stone had called an unexpected adjournment that lasted for five hours at the special shareholders meeting that had been called for the purpose of approving the acquisition, Stone finally approved the deal, and Combined at last had a new leader.
Pat Ryan's management style differed considerably from W. Clement Stone's. Ryan, while himself a good motivator, was generally described as less flamboyant and more diplomatic. The new CEO of Combined demonstrated his approach by announcing a major acquisition just two months after taking charge of the company's operations. Combined purchased the Chicago-based insurance brokerage Rollins Burdick Hunter Company for $109 million. Rollins Burdick, which was well known for its large corporate clients, absorbed Combined's other brokerage operations, making it the eighth largest insurance broker in the United States. The acquisition provided Combined with a source of fee income that was not readily susceptible to decline because of the less competitive nature of corporate insurance.
In 1982, although revenue rose 27 percent, net earnings dropped 19 percent. Ryan began to cut costs and integrate Combined's greatly diversified operations. In 1983 revenues grew 18 percent and operating earnings jumped 47 percent. The Ryan Insurance subsidiary stretched its extended warranty insurance to appliances, and Union Fidelity took advantage of the growing need for supplemental health insurance.
Acquisition Spree in the Late 1980s
In April 1986 Combined bought the Life Insurance Company of Virginia for $557 million. The acquisition further widened Combined's product line, notably adding an array of interest-sensitive universal life products for upscale markets.
In January 1987 the Rollins Burdick Hunter unit bought five regional operations: Allen, Hart, Franz and Zehnder of Los Angeles; Schroeter, White and Johnson of Oakland, California; Pilot Insurance Agency of Winston-Salem, North Carolina; Todorovich Agency of St. Louis, Missouri; and the agency operations of Springhouse Financial Corporation of Philadelphia, Pennsylvania.
In March 1987 Combined International Corporation's shareholders voted to change the name of the company to Aon Corporation. Patrick Ryan said the name change was necessary to eliminate confusion between the holding company and its subsidiary, Combined Insurance Company of America. Continuing its diversification, Aon bought the employee-benefits consulting firm Miller, Mason and Dickenson for $12 million in the summer of 1988, and in September bought the nation's ninth largest reinsurance agent, Reinsurance Agency. In January 1989 Aon restructured its subsidiary Rollins Burdick Hunter Company, setting up a holding company to oversee four units: Rollins Burdick Hunter Company, the brokerage; Rollins Specialty Group, a newly created unit concentrating on brokerage services for financial institutions, associations, and affinity groups; Miller, Mason and Dickenson, the newly acquired employee benefits consultant; and Aon Risk Services, a reinsurance brokerage operating through Aon Reinsurance Agency, formerly Reinsurance Agency.
Continuing Acquisitions Spree Through the 1990s
In 1990 Stone left the board of directors and the company he had founded. Ryan continued his growth-through-acquisitions strategy through the early 1990s, maintaining the company's focus on life and health insurance, life underwriting and specialty insurance, and insurance brokerage. In 1991, Aon acquired Hudig-Langeveldt, and the following year, Frank B. Hall.
By 1994, Aon had reached sales of more than $4 billion, almost twice the annual sales of the late 1980s. Net income also had doubled, to $360 million. Ryan, however, felt the company needed to shift its focus, eliminating its slow-growing life insurance and annuities business and beefing up its brokerage and specialty insurance businesses. Within a year, Aon had sold off all of its direct life insurance companies. It also added hostile takeover insurance for small and medium-sized businesses to its specialty insurance offerings.
Aon became the largest insurance brokerage in the world in 1996, primarily through its purchase of Alexander & Alexander Services Inc. Aon acquired the New York-based brokerage for $1.23 billion. Aon's 1997 purchase of The Minet Group also helped pull the company into the lead. Its number one position was short-lived, however, as the rival brokerage Marsh & McLennan Cos. knocked them out with the purchase of Johnson & Higgins in 1997. Aon's size was still impressive: revenues of $5.8 billion in 1997 and 400 offices in 80 countries.
The company extended its global reach in 1998, with numerous overseas purchases. The most prominent acquisitions included Spain's Gil y Carvajal, France's Groupe Leblace de Nicolay, and Bain Hogg of Britain. Seven other purchases were made, primarily in Europe and Latin America. In addition to its purchases, Aon opened new offices and subsidiaries throughout the world, such as Aon Korea. The following year, Aon continued its international acquisitions, buying the Italian insurance firm Nikols Sedgwick Group, among others.
Expenses related to its acquisitions caught up with Aon in 1999. Although sales had exceeded $7 billion, net income fell to $352 million in 1999, down from $541 million in 1998. Integrating the new businesses and updating their technology were among the largest costs, although a restructuring of Aon's brokerage and consulting businesses added $120 million in costs. The collapse of the workers' compensation pool set up by the insurance firm Unicover Managers Inc. also led to $72 million in expenses for Aon, as the company settled litigation related to its underwriting of those pools.
Aon managed to boost income in 2000 to $474 million, despite a stagnant property and casualty insurance market. The integration of its acquisitions continued, as the company sought efficiencies through consolidation. In November 2000, Aon announced the layoff of 3,000 employees and a comprehensive business transformation plan for its brokerage unit, Aon Risk Services. Aon expected to spend $325 million on the restructuring plan, which would reorganize the subsidiary according to industry groups.
Aon continued to shift its brokerage and consulting businesses to more prominent positions within the corporation in 2001. That year, Aon announced plans to divest its underwriting unit, splitting it off to its shareholders. The spinoff would break Aon from the underwriting foundations established by W. Clement Stone in the years after World War II. Although Aon shied away from the voracious acquisitions of the 1990s, it did purchase ASI Solutions Incorporated in 2001. The Canadian company specialized in human resources outsourcing services and would be folded into Aon Consulting Worldwide.
Principal Subsidiaries: Aon Consulting Worldwide, Inc.; Aon Re Worldwide, Inc.; Aon Risk Services Companies, Inc.; Aon Services Group, Inc.; Aon Warranty Group, Inc.; Combined Insurance Company of America; Virginia Surety Company/London General Insurance.
Principal Competitors: American International Group, Inc.; Arthur J. Gallagher & Co.; Marsh & McLennan Cos.; Willis Group Holdings Limited.
OVERALL
Beta: 0.57
Market Cap (Mil.): $17,242.46
Shares Outstanding (Mil.): 330.51
Annual Dividend: 0.60
Yield (%): 1.15
FINANCIALS
AON Industry Sector
P/E (TTM): 20.71 24.08 17.32
EPS (TTM): 24.43 -- --
ROI: 6.21 5.91 4.63
ROE: 11.56 11.23 9.08
Statistics:
Public Company
Incorporated: 1947 as Combined Insurance Company of America
Employees: 51,000
Sales: $7.38 billion (2000)
Stock Exchanges: New York Midwest London Toronto
Ticker Symbol: AOC
NAIC: 524128 Warranty Insurance Carriers, Direct; 524130 Reinsurance Carriers; 524210 Insurance Brokerages; 541330 Administration Management Consulting Services; 541612 Human Resource Consulting Services
Key Dates:
1922: W. Clement Stone sets up a Chicago-based insurance agency, the Combined Registry Company.
1947: Stone combines several insurance companies he had acquired into the Combined Insurance Company of America.
1949: The company purchases the Boston Casualty Company.
1954: Combined acquires the First National Casualty Company of Fond du Lac, Wisconsin.
1972: Clement Stone, the founder's son, becomes president and chief operating officer, and later, CEO.
1980: The company forms the publicly owned Combined International Corporation to act as a holding company.
1982: The corporation acquires the Ryan Insurance Company for $133 million; its founder, Patrick G. Ryan, then becomes president and CEO of Combined.
1986: Combined buys the Life Insurance Company of Virginia for $557 million.
1987: Combined International Corporation changes its name to Aon Corporation.
1988: Aon buys the nation's ninth largest reinsurance agent, Reinsurance Agency.
1996: Aon acquires Alexander & Alexander Services Inc. for $1.23 billion.
1998: The corporation purchases ten large international companies, including Spain's Gil y Carvajal, France's Groupe Leblace de Nicolay, and Britain's Bain Hogg.
2001: Aon announces plans to divest its underwriting unit.
Name Age Since Current Position
Knight, Lester 52 2008 Independent Non-Executive Chairman of the Board
Case, Gregory 48 2005 President, Chief Executive Officer, Director
Davies, Christa 39 2008 Chief Financial Officer, Executive Vice President - Global Finance
McGill, Stephen 52 2008 Chairman and Chief Executive Officer of Aon Risk Solutions
Fradin, Russell 55 2010 Chairman and Chief Executive Officer of Aon Hewitt
Besio, Gregory 53 2008 Executive Vice President, Chief Administrative Officer and Head - Global Strategy
Lieb, Peter 54 2009 Executive Vice President, General Counsel
Meissner, Laurel 52 2009 Senior Vice President, Principal Accounting Officer, Global Controller
Farmer, Jeremy 61 2003 Senior Vice President, Head - Human Resources
Clement, Philip 45 2010 Global Chief Marketing and Communications Officer
O'Connor, Michael 42 Chief Operating Officer of Aon Risk Solutions
Jannotta, Edgar 79 1995 Independent Director
McKenna, Andrew 81 1970 Independent Director
Notebaert, Richard 63 1998 Independent Director
Rogers, John 53 1993 Independent Director
Woo, Carolyn 56 1998 Independent Director
Morrison, Robert 68 2000 Independent Director
Martin, R. Eden 70 2002 Independent Director
Kalff, Jan 73 2003 Independent Director
Losh, J. Michael 64 2003 Independent Director
Santona, Gloria 60 2004 Independent Director
Myers, Richard 69 2006 Independent Director
Conti, Fulvio 63 2008 Independent Director
Francis, Cheryl 56 2010 Independent Director
Green, Judson 58 2010 Independent Director
Address:
123 North Wacker Drive
Chicago, Illinois 60606
U.S.A.
Aon was created in 1982, when the Ryan Insurance Group (founded by Pat Ryan in the 1960s) merged with the Combined Insurance Company of America (founded by W. Clement Stone in 1919). In 1987, that company was introduced to Wall Street as Aon, a Gaelic word meaning “oneness”. Combined Insurance was sold to ACE Limited in April 2008.
On August 22, 2008, Aon announced that it had acquired London-based Benfield Group. The acquiring price was US$1.75 billion or £935 million, with US$170 million of debt.[5] Today, the company is best known internationally as the principal sponsor of English football giant, Manchester United.[6][7]
On July 12, 2010, Aon announced that it has agreed to buy Lincolnshire, IL based Hewitt Associates for $4.9 billion in cash and stock.
Aon Corporation (Aon), incorporated in 1979, provides risk management services, insurance and reinsurance brokerage, and human resource consulting and outsourcing services. Aon delivers its technical expertise locally through colleagues. The Company serves clients through the businesses, which include risk solutions and human resource (HR) Solutions. The Company’s clients include corporations and businesses, insurance companies, professional organizations, independent agents and brokers, Governments, and other entities. Aon also serves individuals through personal lines, affinity groups, and certain specialty operations. In October 2010, Aon completed the acquisition of Hewitt Associates, Inc. (Hewitt), a human resource consulting and outsourcing company. Hewitt operates together with Aon's existing consulting and outsourcing operations under the Aon Hewitt brand in its HR Solutions segment.
Risk Solutions
Risk Solutions (formerly Risk and Insurance Brokerage Services) acts as an advisor and insurance and reinsurance broker, helping clients manages their risks via consultation, as well as negotiation and placement of insurance risk with insurance carriers through its distribution network. During the year ended December 31, 2010, the Risk Solutions segment generated approximately 75% of the Company’s consolidated total revenues. Aon provides risk and insurance brokerage and related services in this segment primarily through its Aon Risk Solutions and Aon Benfield companies.
The Company operates in Risk Solutions segment through two transactional product lines: retail brokerage and reinsurance brokerage. In addition, a key component of this business is its risk consulting service offering. Retail brokerage encompasses Aon’s retail brokerage services, affinity products, managing general underwriting, placement and captive management services. The United States operations provide products and services to clients in North, Central and South America, the Caribbean, and Bermuda. It’s United Kingdom; Europe, Middle East & Africa, and Asia Pacific operations offer similar products and services to clients throughout the rest of the world. The Aon Client Promise enables its colleagues to describe benchmark and price the value it delivers to clients.
During 2010, the Company developed the Global Risk Insight Platform (GRIP), which provided its clients and insurers with additional market insight, as well as product offerings and facilities. As a retail broker, Aon serves as an advisor to clients and facilitate a spectrum of risk management solutions for property liability, general liability, professional and directors' and officers' liability, workers' compensation, and additional exposures. The Company delivers specialized advice and services, in such industries as technology, financial services, agribusiness, aviation, construction, health care and energy, among others. Through its global affinity business, Aon provides products for professional liability, life, disability income and personal lines for individuals, associations and businesses. In addition, it is a provider of risk consulting services, including captive management that provide its clients with alternative vehicles for managing risks. The Company’s eSolutions products enable clients to manage risks, policies, claims and safety concerns through an integrated technology platform.
The Company’s reinsurance brokerage offers advisory services in program design and claim recoveries. An insurance or reinsurance company may seek reinsurance or other risk-transfer solutions on all or a portion of the risks it insures. To accomplish this, its reinsurance brokerage services use dynamic financial analysis and capital market alternatives, such as transferring catastrophe risk through securitization. Reinsurance brokerage also offers capital management transaction and advisory services. Aon acts as a broker or intermediary for all classes of reinsurance. It places two main types of property and casualty reinsurance: treaty reinsurance, which involves the transfer of a portfolio of risks, and facultative reinsurance, which entails the transfer of part or all of the coverage provided by a single insurance policy. The Company also places specialty lines, such as professional liability, medical malpractice, accident, life and health.
Aon also provides actuarial, enterprise risk management, catastrophe management and rating agency advisory services. It has developed tools and models that help its clients understand the financial implications of natural and man-made catastrophes. Aon Benfield Securities provides global capital management transaction and advisory services for insurance and reinsurance clients. In this capacity, Aon Benfield Securities is engaged in the structuring, underwriting and trading of insurance-linked securities; the arrangement of financing for insurance and reinsurance companies, including Lloyd's syndicates, and providing advice on strategic and capital alternatives, including mergers and acquisitions. Aon generates revenues through commissions, fees from clients, and compensation from insurance and reinsurance companies, for services it provides to them.
HR Solutions
HR Solutions (formerly Consulting) partners with organizations, and designs, implements, communicates and administers a range of human capital, retirement, investment management, health care, compensation and talent management strategies. During 2010, the HR Solutions segment generated approximately 25% of its consolidated total revenues. During 2010, the HR Solutions segment had operations in the United States, Canada, the United Kingdom, Europe, South Africa, Latin America and the Asia Pacific region. The Company provides products and services in this segment primarily under the Aon Hewitt brand. The Company's HR Solutions professionals work with their clients to identify options in human resource outsourcing and process improvements. Prime areas where companies choose to use outsourcing services include benefits administration, core human resource processes, workforce and talent management. Aon Hewitt offers a range of human capital services, including consulting services and outsourcing services.
The Company’s consulting services includes health and benefits, retirement, compensation and strategic human capital. Health and Benefits advises clients about structuring, funding, and administering employee benefit programs, which attract, retain, and motivate employees. Benefits consulting include health and welfare, executive benefits, workforce strategies and productivity, absence management, benefits administration, data-driven health, compliance, employee commitment, investment advisory, and elective benefits services. Retirement specializes in providing global actuarial services, defined contribution consulting, investment consulting, tax and ERISA consulting, and pension administration. Compensation focuses on compensation advisory/counsel, including compensation planning design, executive reward strategies, salary survey and benchmarking, market share studies and sales force effectiveness assessments, with special expertise in the financial services and technology industries. Strategic human capital delivers advice to complex global organizations on talent, change and organizational effectiveness issues, including talent strategy and acquisition, executive on-boarding, performance management, leadership assessment and development, communication strategy, workforce training and change management.
Aon’s outsourcing services include benefits outsourcing and human resource business process outsourcing (HR BPO). Benefits Outsourcing applies its HR expertise primarily through defined benefit (pension), defined contribution (401(k)), and health and welfare administrative services. The Company’s model replaces the resource-intensive processes once required to administer benefit plans with solutions. HR BPO provides solutions to manage employee data; administer benefits, payroll and other human resources processes, and record and manage talent, workforce and other core HR process transactions, as well as other complementary services, such as absence management, flexible spending, dependent audit and participant advocacy. The Company’s revenues are principally derived from fees paid by clients for advice and services. In addition, insurance companies pay Aon commissions for placing individual and group insurance contracts, primarily life, health and accident coverages, and pay fees for consulting and other services that it provides to them.
The Company competes with Marsh & McLennan Companies, Inc. and Willis Group Holdings Ltd.
In 1981 the new Combined International Corporation made its first acquisition when it bought the Union Fidelity Corporation along with its Nashaming Valley Information Processing unit, for $105.5 million. Union Fidelity was an accident and health insurer, which excelled at direct-response marketing and sold 75 percent of its policies through direct-mail and newspaper campaigns. The unit was expected to give Combined's door-to-door marketers a needed boost. Combined suffered from the rising costs of recruiting and maintaining a large battalion of field representatives, and the company's domestic sales had been flat for the two years prior to the acquisition.
In March 1982 Clement Stone abruptly resigned as president and CEO of Combined, citing personal reasons. His father once again resumed control of the company. After his resignation, Clement Stone received a $3.4 million consulting contract.
At age 79, W. Clement Stone was once again caretaker of the company he had founded. At the same time, the company was troubled by stagnation in domestic premiums. Although the slump in growth was offset in the short term by excellent investment results, a plan to deal with rapidly changing markets was needed.
Combined solved its leadership problems with the acquisition of the Ryan Insurance Company in August 1982. Combined spent $133 million for the 18-year-old specialty insurer and brokerage, which had been a pioneer in credit life insurance for auto dealerships and extended mechanical warranty insurance agreements. Founder Patrick G. Ryan then became president and CEO of Combined. Stone remained chairman. Although W. Clement Stone had called an unexpected adjournment that lasted for five hours at the special shareholders meeting that had been called for the purpose of approving the acquisition, Stone finally approved the deal, and Combined at last had a new leader.
Pat Ryan's management style differed considerably from W. Clement Stone's. Ryan, while himself a good motivator, was generally described as less flamboyant and more diplomatic. The new CEO of Combined demonstrated his approach by announcing a major acquisition just two months after taking charge of the company's operations. Combined purchased the Chicago-based insurance brokerage Rollins Burdick Hunter Company for $109 million. Rollins Burdick, which was well known for its large corporate clients, absorbed Combined's other brokerage operations, making it the eighth largest insurance broker in the United States. The acquisition provided Combined with a source of fee income that was not readily susceptible to decline because of the less competitive nature of corporate insurance.
In 1982, although revenue rose 27 percent, net earnings dropped 19 percent. Ryan began to cut costs and integrate Combined's greatly diversified operations. In 1983 revenues grew 18 percent and operating earnings jumped 47 percent. The Ryan Insurance subsidiary stretched its extended warranty insurance to appliances, and Union Fidelity took advantage of the growing need for supplemental health insurance.
Acquisition Spree in the Late 1980s
In April 1986 Combined bought the Life Insurance Company of Virginia for $557 million. The acquisition further widened Combined's product line, notably adding an array of interest-sensitive universal life products for upscale markets.
In January 1987 the Rollins Burdick Hunter unit bought five regional operations: Allen, Hart, Franz and Zehnder of Los Angeles; Schroeter, White and Johnson of Oakland, California; Pilot Insurance Agency of Winston-Salem, North Carolina; Todorovich Agency of St. Louis, Missouri; and the agency operations of Springhouse Financial Corporation of Philadelphia, Pennsylvania.
In March 1987 Combined International Corporation's shareholders voted to change the name of the company to Aon Corporation. Patrick Ryan said the name change was necessary to eliminate confusion between the holding company and its subsidiary, Combined Insurance Company of America. Continuing its diversification, Aon bought the employee-benefits consulting firm Miller, Mason and Dickenson for $12 million in the summer of 1988, and in September bought the nation's ninth largest reinsurance agent, Reinsurance Agency. In January 1989 Aon restructured its subsidiary Rollins Burdick Hunter Company, setting up a holding company to oversee four units: Rollins Burdick Hunter Company, the brokerage; Rollins Specialty Group, a newly created unit concentrating on brokerage services for financial institutions, associations, and affinity groups; Miller, Mason and Dickenson, the newly acquired employee benefits consultant; and Aon Risk Services, a reinsurance brokerage operating through Aon Reinsurance Agency, formerly Reinsurance Agency.
Continuing Acquisitions Spree Through the 1990s
In 1990 Stone left the board of directors and the company he had founded. Ryan continued his growth-through-acquisitions strategy through the early 1990s, maintaining the company's focus on life and health insurance, life underwriting and specialty insurance, and insurance brokerage. In 1991, Aon acquired Hudig-Langeveldt, and the following year, Frank B. Hall.
By 1994, Aon had reached sales of more than $4 billion, almost twice the annual sales of the late 1980s. Net income also had doubled, to $360 million. Ryan, however, felt the company needed to shift its focus, eliminating its slow-growing life insurance and annuities business and beefing up its brokerage and specialty insurance businesses. Within a year, Aon had sold off all of its direct life insurance companies. It also added hostile takeover insurance for small and medium-sized businesses to its specialty insurance offerings.
Aon became the largest insurance brokerage in the world in 1996, primarily through its purchase of Alexander & Alexander Services Inc. Aon acquired the New York-based brokerage for $1.23 billion. Aon's 1997 purchase of The Minet Group also helped pull the company into the lead. Its number one position was short-lived, however, as the rival brokerage Marsh & McLennan Cos. knocked them out with the purchase of Johnson & Higgins in 1997. Aon's size was still impressive: revenues of $5.8 billion in 1997 and 400 offices in 80 countries.
The company extended its global reach in 1998, with numerous overseas purchases. The most prominent acquisitions included Spain's Gil y Carvajal, France's Groupe Leblace de Nicolay, and Bain Hogg of Britain. Seven other purchases were made, primarily in Europe and Latin America. In addition to its purchases, Aon opened new offices and subsidiaries throughout the world, such as Aon Korea. The following year, Aon continued its international acquisitions, buying the Italian insurance firm Nikols Sedgwick Group, among others.
Expenses related to its acquisitions caught up with Aon in 1999. Although sales had exceeded $7 billion, net income fell to $352 million in 1999, down from $541 million in 1998. Integrating the new businesses and updating their technology were among the largest costs, although a restructuring of Aon's brokerage and consulting businesses added $120 million in costs. The collapse of the workers' compensation pool set up by the insurance firm Unicover Managers Inc. also led to $72 million in expenses for Aon, as the company settled litigation related to its underwriting of those pools.
Aon managed to boost income in 2000 to $474 million, despite a stagnant property and casualty insurance market. The integration of its acquisitions continued, as the company sought efficiencies through consolidation. In November 2000, Aon announced the layoff of 3,000 employees and a comprehensive business transformation plan for its brokerage unit, Aon Risk Services. Aon expected to spend $325 million on the restructuring plan, which would reorganize the subsidiary according to industry groups.
Aon continued to shift its brokerage and consulting businesses to more prominent positions within the corporation in 2001. That year, Aon announced plans to divest its underwriting unit, splitting it off to its shareholders. The spinoff would break Aon from the underwriting foundations established by W. Clement Stone in the years after World War II. Although Aon shied away from the voracious acquisitions of the 1990s, it did purchase ASI Solutions Incorporated in 2001. The Canadian company specialized in human resources outsourcing services and would be folded into Aon Consulting Worldwide.
Principal Subsidiaries: Aon Consulting Worldwide, Inc.; Aon Re Worldwide, Inc.; Aon Risk Services Companies, Inc.; Aon Services Group, Inc.; Aon Warranty Group, Inc.; Combined Insurance Company of America; Virginia Surety Company/London General Insurance.
Principal Competitors: American International Group, Inc.; Arthur J. Gallagher & Co.; Marsh & McLennan Cos.; Willis Group Holdings Limited.
OVERALL
Beta: 0.57
Market Cap (Mil.): $17,242.46
Shares Outstanding (Mil.): 330.51
Annual Dividend: 0.60
Yield (%): 1.15
FINANCIALS
AON Industry Sector
P/E (TTM): 20.71 24.08 17.32
EPS (TTM): 24.43 -- --
ROI: 6.21 5.91 4.63
ROE: 11.56 11.23 9.08
Statistics:
Public Company
Incorporated: 1947 as Combined Insurance Company of America
Employees: 51,000
Sales: $7.38 billion (2000)
Stock Exchanges: New York Midwest London Toronto
Ticker Symbol: AOC
NAIC: 524128 Warranty Insurance Carriers, Direct; 524130 Reinsurance Carriers; 524210 Insurance Brokerages; 541330 Administration Management Consulting Services; 541612 Human Resource Consulting Services
Key Dates:
1922: W. Clement Stone sets up a Chicago-based insurance agency, the Combined Registry Company.
1947: Stone combines several insurance companies he had acquired into the Combined Insurance Company of America.
1949: The company purchases the Boston Casualty Company.
1954: Combined acquires the First National Casualty Company of Fond du Lac, Wisconsin.
1972: Clement Stone, the founder's son, becomes president and chief operating officer, and later, CEO.
1980: The company forms the publicly owned Combined International Corporation to act as a holding company.
1982: The corporation acquires the Ryan Insurance Company for $133 million; its founder, Patrick G. Ryan, then becomes president and CEO of Combined.
1986: Combined buys the Life Insurance Company of Virginia for $557 million.
1987: Combined International Corporation changes its name to Aon Corporation.
1988: Aon buys the nation's ninth largest reinsurance agent, Reinsurance Agency.
1996: Aon acquires Alexander & Alexander Services Inc. for $1.23 billion.
1998: The corporation purchases ten large international companies, including Spain's Gil y Carvajal, France's Groupe Leblace de Nicolay, and Britain's Bain Hogg.
2001: Aon announces plans to divest its underwriting unit.
Name Age Since Current Position
Knight, Lester 52 2008 Independent Non-Executive Chairman of the Board
Case, Gregory 48 2005 President, Chief Executive Officer, Director
Davies, Christa 39 2008 Chief Financial Officer, Executive Vice President - Global Finance
McGill, Stephen 52 2008 Chairman and Chief Executive Officer of Aon Risk Solutions
Fradin, Russell 55 2010 Chairman and Chief Executive Officer of Aon Hewitt
Besio, Gregory 53 2008 Executive Vice President, Chief Administrative Officer and Head - Global Strategy
Lieb, Peter 54 2009 Executive Vice President, General Counsel
Meissner, Laurel 52 2009 Senior Vice President, Principal Accounting Officer, Global Controller
Farmer, Jeremy 61 2003 Senior Vice President, Head - Human Resources
Clement, Philip 45 2010 Global Chief Marketing and Communications Officer
O'Connor, Michael 42 Chief Operating Officer of Aon Risk Solutions
Jannotta, Edgar 79 1995 Independent Director
McKenna, Andrew 81 1970 Independent Director
Notebaert, Richard 63 1998 Independent Director
Rogers, John 53 1993 Independent Director
Woo, Carolyn 56 1998 Independent Director
Morrison, Robert 68 2000 Independent Director
Martin, R. Eden 70 2002 Independent Director
Kalff, Jan 73 2003 Independent Director
Losh, J. Michael 64 2003 Independent Director
Santona, Gloria 60 2004 Independent Director
Myers, Richard 69 2006 Independent Director
Conti, Fulvio 63 2008 Independent Director
Francis, Cheryl 56 2010 Independent Director
Green, Judson 58 2010 Independent Director
Address:
123 North Wacker Drive
Chicago, Illinois 60606
U.S.A.